“How Car Dealers Determine Trade-In Value On Your Vehicle”
What's Your Trade-In Value?
Where Do Car Dealers Get Their Values From?
When it comes to trading your vehicle in at your friendly neighborhood car dealer, wouldn’t it be nice to know how they get their values? If you were able to tap into that same information, then you could actually accomplish two things depending on your situation:
- First, you’d know the actual trade amount so if the dealer tired to “Low Ball” you, you would know what the real money on the trade would be.
- Secondly, if you were looking to purchase a used vehicle, you could zero in on the cost of what they might own the used vehicle for which could get you a better deal on the used vehicle.
So what exactly is a “Low Ball” and how does it work? Or more importantly, how does it potentially cost you money? Let’s say you’re trading in a 2009 Honda Accord 4 Door LX model. It has an automatic transmission and a 4 cylinder engine with 24,000 miles. It’s a clean car without any defects mechanically as well as ascetically.
If “Real Money” is $15,000 on the Honda, the dealer could “Low Ball” you, and tell you the appraisal came in at $13,500. In other words, the dealer just “Low Balled” you $1,500 on your trade-in. If you accept the offer, then that $1,500 goes directly to their bottom line by increasing the gross profit on that deal by $1,500.
“It’s All Part of the Game”
If they “Low Ball” you like that, they will then try to convince you how and why the car is only worth $13,500. But it ultimately boils down to the game of negotiations. What’s the first rule in negotiations? Start high as you can always come down, but you can’t go back up. When it comes to the trade, it’s the same concept but only in reverse; start low and come up if you have to. (Click Here for an article I wrote on negotiating)
If you haven’t done your homework, or if you really don’t know what trade-in value is then the dealer can “Low Ball” you and potentially “Steal” your trade. If that happens it could cost you several hundred dollars.
“The Online Information Is Confusing”
Most people in this day and age will go online to try to come up with values on their vehicles so they can avoid the “Lowball” tactic by car dealers. But if you go to the big three car information sites you’ll soon see that it’s hard to come up with an accurate figure because they are all over the board.
The car dealership will use that against you as well. They will say something like, “The online sites don’t agree on anything when it comes to trade-in values. They are basic guidelines and aren’t a true representation of the Actual Cash Value (A.C.V.) of your vehicle.”
“The Top Three Car Buying Information Websites”
The top three car buying information websites are as follows: www.edmunds.com, www.kbb.com, and www.nadaguides.com. If we use the information from above regarding the 2009 Honda Accord to figure out trade-in/wholesale values here’s what we come up with:
$14,217 is the Trade-in amount
$15,580 is the Private Party Value
$16,694 is the Retail Value
Click Here to see the Edmunds.com page where I got that information from. Note: Depending on when you click on the link, the url for that page might not work if Edmunds.com decided to made some changes to their web site which is a possibility if you’re looking at this article somewhere down the road after I made the post. The same is true for www.kbb.com and www.nadaguides.com.
$16,950 Excellent Condition
$15,950 Good Condition
$14,350 Fair Condition
$16,325 Clean Trade
$15,275 Average Trade
$13,975 Rough Trade
Again, Click Here to view the page from nadaguides.com.
As you can see, it can be a little confusing trying to come up with a wholesale/trade-in value that makes sense.Edmunds.com says the trade-in amount is $14,217 while kbb.com breaks their trade values down into three categories; excellent, good and fair. The kbb.com figures go from $14,350 for a fair value, to $16,950 for excellent trade value.
So based on all those figures, what’s the wholesale/trade-in amount? Edmunds.com gives only one trade-in figure which is $14,217. Kbb.com gives three amounts: $16,950 is excellent. $15,950 is good, and $14,250 is fair.Nadaguides.com also has three wholesale/trade-in figures which are: $16,325 clean trade. $15,275 average trade and $13,975 is rough trade.
“So What’s The Trade-In Value?”
Like I said earlier, it’s a little confusing mainly because all three sites use a different format. And also as mentioned earlier, the car dealership is going to use that against you. They’ll also tell you that these sites don’t purchase trade-ins; which is true. Hey, when the “Rubber hit’s the road” it’s all about the money. The above mentioned websites don’t purchase trade-ins.
The way I’d explain it is this…If we took that 2009 Honda Accord and turned it into a pile of cash, that’s the true value. The car dealership is looking at it from the perspective of, “If we had to sell the vehicle at an auction, how much could we get for it.” That’s why they use the term Actual Cash Value or A.C.V. in car dealership terms. What’s the car worth today in greenbacks?
The Black Book
The Infamous “Black Book”
All car dealers use the infamous “Black Book” to determine trade-in/wholesale values. The values in the “Black Book” are derived from local car auctions, and are the best representation to the car dealer of what the A.C.V. on the vehicle might be. To them, that’s the only guide book that matters because it’s based on actual sales. The book is updated weekly, so the information is always current.
If we look at the 2009 Honda Accord that we talked about earlier, here’s how the numbers would break down by “Black Book” standards:
$17,000 Extra Clean
When it comes to placing a figure on a particular vehicle like the Honda Accord, the dealer will want to stay around average “Black Book” which in this case is $14,700. Assuming the car was in great shape for a two year old Honda, average book (or a little less) is where they would put the initial figure on the car.
Even if the car isn’t “Average” the dealers will all appraise the car somewhere around “Average Book.” Again, if they have to, they can always go up to put a deal together.
For more information on this subject and to find out how to get "Black Book" information, check out my blog @ http://cardealerbuyingsecrets.com
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